Stateline reports that districts courts in Arizona and New Hampshire have ruled that pension reform requiring higher contributions from employees are unconstitutional.
Maricopa County Superior Court judge Eileen Willet, argues, "The state has impaired its own contract...By paying a higher proportionate share for their pension benefits than they had been required to pay when hired, [state workers] are forced to pay additional consideration for a benefit which has remained the same."
Other states where pension modifications are being challenged by unions include Florida, Nebraska, and New Jersey. As the article notes this may be one reason why states tend to pursue the path of least resistance (and least fiscal impact): changing benefits only for new hires.
The extent to which the terms of a pension formula are protected depends on how statutes are written. In Arizona the constitution states that upon hiring, public employees enter into a contract with their employer and agree to split the contributions to the pension plan 50-50. Arizona's move to increase the employee share to 53 percent runs afoul of this provision according to Judge Willet. New Hampshire's constitution is not this explicit. The court bases its ruling on previous case law that forbids the state from contract impairment.
These rulings point to the unpredictable future of pension reform. Where states and local governments continue to be constrained by actions that prevent pension plans from being modified for current employees the options left are equally painful: layoff workers, raise taxes, issue debt. There is also the "soft bailout" scenario, considered by Michael Greve. That road, he argues, leads the U.S. to devalued pensions and an Argentinian future.